Friday, May 20, 2016

Friday, May 20, Night Wall Street Roundup: Dollar Rises To Third Weekly Gain; Stocks Jump

By Herbert Lash
May 20, 2016

Global equity markets rose on Friday as investors took in stride the possibility the Federal Reserve may hike interest rates in June, a view that helped U.S. bond yields to rise and lifted the dollar to a third straight week of gains.

U.S. home resales rose more than expected in April, suggesting the American economy has continued to gather pace during the second quarter. The data added to a growing perception that a rate hike next month or in July would not derail U.S. growth.

Wall Street rose, following gains in Europe, with the S&P financial sector index .SPSY rising 0.61 percent as recent comments from Fed officials suggested the possibility of a rate increase as early as June.

Information technology .SPLRCT was the biggest gainer among the S&P sectors, rising 1.18 percent, on a higher-than-expected profit forecast from chip company Applied Materials (AMAT.O), whose shares closed up 13.8 percent.

New York Fed President William Dudley said on Thursday the U.S. economy was strong enough to warrant a rate hike.

MSCI's all-country world stock index .MIWD00000PUS rose 0.77 percent, and the pan-European FTSEurofirst 300 index .FTEU3 of leading regional stocks closed up 1.26 percent to 1,326.45 points.

On Wall Street, the Dow Jones industrial average .DJI closed up 65.54 points, or 0.38 percent, to 17,500.94. The S&P 500 .SPX gained 12.28 points, or 0.6 percent, to 2,052.32 and the Nasdaq Composite .IXIC added 57.03 points, or 1.21 percent, to 4,769.56.

For the week, the Dow fell 0.2 percent, the S&P 500 gained 0.3 percent and Nasdaq climbed 1.1 percent.

The dollar traded close to two-month highs after it pushed past $1.12 per euro for the first time since March. Sterling gained 1.7 percent for the week as fears abated that Britain would vote to leave the European Union next month, a move referred to as "Brexit." EURGBP=GBP=

"The question for traders now is whether this Fed rate hike issue is a 'risk-on' or a 'risk-off' situation," said Saxo Bank FX strategist John Hardy. "Our interpretation is that they want to do a June move, especially now Brexit chances seem to have dropped right off."

Not everyone believes a rate hike is imminent.

The probability of a June rate hike has jumped to 30 percent from around 4 percent at the start of the week, according to CME Group's FedWatch site. Futures markets are predicting two rate hikes this year as opposed to just one as recently as last week.

"There is not enough data suggesting a rate hike is warranted," said Rahul Shah, chief executive of Ideal Asset Management, adding that equity gains amounted to a relief rally.

The dollar index .DXY was slightly higher at 95.367 after reaching 95.502 overnight, a level last seen on March 29.

Against the yen, the dollar gained 0.16 percent to set another three-week high, at 110.58 yen JPY=. The euro EUR= rose 0.12 percent against the dollar at $1.1216.

Japan and the United States remain at loggerheads over exchange-rate policy with Washington dismissing Tokyo's concerns that recent yen rises are excessive. Currency market stability is among topics financial leaders of the Group of Seven advanced economies are discussing at a two-day gathering that kicked off Friday.

A stronger dollar spurred investors to cash in on a second week of oil price gains, with the focus remaining on the market's rebalancing as the global glut faced unplanned supply outages.

Global benchmark Brent crude prices LCOc1 closed down 9 cents to settle at $48.72 a barrel.

U.S. West Texas Intermediate (WTI) crude futures CLc1 fell 41 cents to settle at $47.75 a barrel.

U.S. Treasury yields, which move in the opposite direction of prices, rose to their highest level in about two months.

Benchmark U.S. 10-year notes US10YT=RR fell 1/32 in price, pushing their yield up to 1.8454 percent. Earlier yields hit 1.868 percent.

Gold edged lower for the third straight session and notched its biggest weekly slide in nearly two months on growing expectations of a Fed rate hike.

U.S. gold futures GCv1 for June delivery settled down $1.90 at $1,252.90.

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Are Dems More Divided Than The GOP?

By Noah Rothman
May 20, 2016

Like forcing a dry bulk container ship into a 180-degree turn, much of the nation’s political press is only beginning to shift their attentions away from the GOP and to that other unruly presidential primary. Though the presumptive Republican presidential nominee is not acting like it, the race for the GOP presidential nod has been over for weeks. Similarly, the outcome of the Democratic Party’s primary likely became a foregone conclusion by mid-March, but Bernie Sanders refuses to acknowledge the obvious and give up the ghost of his surprisingly potent challenge to Hillary Clinton. That dynamic is exacerbating impassioned divisions within the Democratic Party’s ranks that are growing more intense with each passing day. It’s in the data; everyone can see it. But this revelation does not make it into headlines on the nation’s front pages, in part because political observers expect this temporary chafing among Sanders supporters to heal. But will it?

A blockbuster Fox News survey released on Wednesday that showed Clinton trailing Trump nationally with 42 to 45 percent scrambled a media narrative that had for so long taken Trump’s vulnerabilities in a general election at face value. It is almost certain that Trump, like his last two Republican predecessors, is enjoying a bump in the polls as a result of having defeated his competition and all but secured the GOP nomination. But a deeper dive into that survey suggests that this condition should only last as long as the Democratic Primary remains as bitter and divisive as it is right now.

That survey found a majority of Americans have a favorable opinion of President Barack Obama (which, if it holds into November, will make convincing the public to support radical change in the form of President Trump a hard sell). 89 percent of Democrats have a favorable view of the president’s performance in office, but just 83 percent of self-described Democrats say they would vote for Clinton over Trump in the fall. 11 percent of self-described Sanders backers told Fox’s pollsters they would back Trump over Clinton in November. That survey also found Clinton securing her lowest favorability rating in the history of that survey, down to just 37 percent from a 2012 high of 63 percent. Nearly a quarter of self-described Democrats say they have an unfavorable opinion of Clinton. A third of self-identified Democrats do not believe Clinton is “honest and trustworthy” and 47 percent said it was accurate to claim Clinton “will say anything to get elected.” In short, the poll found Clinton reaching the nadir of her popularity among her fellow Democrats.

The verdict on Mrs. Clinton from her fellow party members is even more damning in the latest CBS News/New York Times poll released on Thursday. 28 percent of Sanders-backing Democrats told pollsters they would not support Clinton if she won the Democratic presidential nomination. Meanwhile, eight in ten Republican voters say that their party should unite behind Donald Trump even if they disagree with him, and the celebrity candidate’s favorability rating among Republicans is on the rise.

That poll also provided a clue that partially explains why the nation’s political observers seem inclined to dismiss this intramural Democratic tiff as just a passing phase. “While 72 percent of Mr. Sanders’s supporters say they would vote for Mrs. Clinton in the Fall, a Times/CBS News survey taken in early May of 2008 found that only 60 percent of Mrs. Clinton’s supporters said they would vote for Barack Obama in the general election,” the Times reported. That bitterness did not linger; wounds healed and the Democratic Party united behind Obama. The widely shared presumption is that Democratic confidence in Clinton will rebound when all parties agree that the presidential primary is over.

While there was plenty of bad blood between Clinton and Obama, not to mention between their respective supporters, Clinton circa 2008 was never as inclined as Sanders is today to take the party down with him. Clinton never tacitly endorsed the work of the agitators among her supporters who sought to hijack the process. Clinton supporters never orchestrated a campaign of threats directed at party officials who did not certify her delegates. State-level parties never lodged formal complaints with the Democratic National Committee against the Clinton campaign for its unruly behavior. Clinton never issued ultimatums against her own party if its voters nominated Barack Obama. Clinton never deluded her supporters into believing that there was a pathway to the nomination for her at a contested convention in Denver, despite the fact that such an outcome was an obvious impossibility.

Bernie Sanders, a professionally quixotic independent senator who geared his career toward serving as a critique of the nation’s liberal establishment, has little allegiance to his adopted political party. The Vermont senator’s behavior today is a window into what the GOP would be wrestling with if their outsider insurgent candidate had not prevailed. The Democratic divide may repair itself after the nominating conventions, but what if it doesn’t? The Boston Globe’s James Pindell observed that neither Trump nor Clinton is particularly obliged to reassemble the traditional Republican and Democratic coalitions, and both can afford to shed some support at the margins if they can replace those disaffected loyalists with new or converted opposition voters. Citing a recent CNN/ORC survey, Pindell noted that the source of both Clinton and Trump’s strength in the polls is one another: “A majority of Clinton voters (51 percent) said they were really voting against Trump, while 57 percent of Trump voters said they were really voting against Clinton.” If it’s a negative election, who is to say that negativity will not persist well into the autumn?

The Democratic presidential primary will end. It may not be too late to heal the rifts associated with the extended contest when it does. The presumption that those fissures will automatically heal is, however, predicated only on presumptions based in the experience of political observers in more conventional election cycles. If there has been one lesson of 2016, it is that the old rules do not apply.

Article Link to Commentary:

What Israel’s Shakeup Won’t Mean

By Jonathan S. Tobin
May 20, 2016

Has Israel just chosen to elevate a warmonger who will set the region aflame? That’s the kind of apocalyptic rhetoric being heard from some of the usual precincts on Israel’s left after Prime Minister Netanyahu chose Avigdor Lieberman to be the country’s new minister of defense. A rough-edged immigrant from the former Soviet Union, Lieberman is viewed by most of Israel’s elite — on the right as well as the left — as something of an extremist thug, and the resulting cries of dismay and alarm about his elevation rang out loud and clear across the political spectrum. The question now for Israel’s overseas friends is how seriously to take the attacks on Lieberman and the laments for the political demise for Moshe Yaalon, the man he is replacing. Should Israelis really be heading to their bomb shelters and will their country’s image take a hit as a result of the Cabinet shakeup?

It should first be said that Yaalon’s departure from the government is a loss for Israel. Though his political skills were never equal to his intellect or his security expertise, Yaalon was one of his country’s most distinguished soldiers and his tenure at the Ministry of Defense was widely considered to be successful in most respects. But in a parliamentary democracy, such a post is always more a matter of politics than technocratic skill. Having run afoul of the prime minister for backing some talkative generals who seemed to be questioning the government’s policies, he made himself expendable once a new coalition alignment became possible. His talk of Israel’s moral decline earned him applause in certain parts of the Israeli media and abroad, but it did not sit well with the prime minister or with other members of Likud where he never felt entirely welcome. While this probably won’t be the last we’ll hear of him, whether he forms his own party or joins one of the other smaller groups in the Knesset, he has become yet another entry in the long list of Likud politicians that thought they could challenge Netanyahu and wound up having to find a new political home.

But what of Lieberman? Is he as bad as the op-ed columnists have been claiming and will he recklessly involve Israel in new conflicts while inflaming the old ones? The answer is that while he will not mesh easily with the defense establishment, he is not likely to make any big mistakes or behave rashly.

Lieberman is well known for making incendiary statements about the Palestinians and supporting the death penalty for terrorists. In particular, he was a strident critic of Netanyahu and Yaalon’s conduct of the 2014 Gaza War, which he felt was mistaken because the counter-attack against the terrorist state was too restrained and in the end left Hamas in power. But now that he’s one of those in the drivers’ seat, no one should expect him to make good on his threats to take them out. Lieberman is a tough talker, but his long tenure in various Cabinet posts over the last 15 years under Ariel Sharon, Ehud Olmert, and Netanyahu shows him to be pragmatic and actually as cautious as the current prime minister. Nor is this the first time he has been handed a post with great responsibility. It should be remembered that he served as foreign minister for five years under Netanyahu and managed not to start any wars there.

But by the same token, having Lieberman back in the spotlight isn’t going to bolster Israel’s image. For a good profile of his early career and his ability to represent the interests of fellow former Russians, read this profile in COMMENTARY from 2011 by Seth Mandel. He is widely derided in Israel as a Putinesque figure and was long dogged by charges of corruption though he was acquitted in 2013. A settler, Lieberman has been branded a racist because of his plan to trade towns were Israeli Arabs live with a proposed Palestinian state in exchange for settlements. But since even peace advocates have spoken of land swaps as part of an eventual peace treaty, it’s hard to see how his idea is much different from that. Nor, despite the heated rhetoric he uses, are his positions about settlements or the peace process very different from that of Yaalon. After all, it was Yaalon who blasted Secretary of State John Kerry for having an “obsessive, messianic” approach to negotiations with the Palestinians. Nevertheless, having Lieberman back in a prominent position will feed the narrative about Israel being governed by right-wing extremists.

Lieberman’s biggest problem is whether he’s up to the job of running Israel’s military. Unlike most defense ministers who are former generals, Lieberman has no particular security expertise. The last time the country had a person in that post with a similarly thin military resume — Labor’s Amir Peretz — was a cautionary tale. Peretz presided over disastrous 2006 Lebanon War and is best remembered for a picture in which he was caught looking through binoculars with the caps on the lenses. As Mandel pointed out, some of the ridicule of Peretz was ethnic in nature because he was from Morocco and Lieberman has experienced some of the same treatment because he is Russian, something that feeds the resentment of his fellow immigrants that vote for Yisrael Beiteinu. But while Netanyahu could limit Lieberman’s influence while he was at the foreign ministry by conducting some of the country’s diplomacy personally or via ambassadors to the U.S. that report to him, Lieberman will be on his own at the defense ministry. The new minister will likely crack down on generals making political speeches — something that Yaalon should have done — but the question is how he will perform if Hamas starts another war. Lieberman has long wanted the defense post to prove his security bona fides. If he is put to the test and found wanting, however, he’ll regret getting his wish.

The dynamic between Lieberman and Netanyahu will also be worth watch watching. Though Lieberman started out in politics by working for Netanyahu and they have served together for many years, they are well known to dislike each other intensely. In essence by swapping Lieberman for Yaalon, as the Times of Israel noted, he has made his worst enemy his ally and his ally his worst enemy. How that is going to work out in the long run is anybody’s guess, but both the prime minister and his new defense minister are, above all, hard-headed politicians who are concerned with keeping themselves in power. Count on the two of them coexisting fairly peacefully until the knives come out for the next election.

There are other aspects to the shakeup that will also have repercussions. Yaalon’s resignation brings the next person on the Likud list into the Knesset. It happens to be Yehuda Glick, an activist for allowing Jewish prayer on Jerusalem’s Temple Mount. While the international press thinks Lieberman is the loose canon, Glick’s presence in parliament may be more of a headache for Netanyahu than the new defense minister.

Where does this leave Israel and its relations with the United States as well as the prospects for peace? Despite the apocalyptic rhetoric from the left about Lieberman’s extremism and the sniping from the right about his qualifications for his new post, the Cabinet shakeup changes nothing about Israel’s strategic position. Peace wasn’t just around the corner even if Netanyahu had made a deal with Herzog. Nor will a new defense minister change anything about the ongoing standoff with Hamas in Gaza. Similarly, the strategic relationship with the United States hinges more on the question of who is running things in Washington than who is running the defense ministry in Tel Aviv. If Lieberman could have relatively cordial relations with Kerry, he will manage just fine with Secretary of Defense Ash Carter. For all of the sound and fury about the Cabinet shuffle, nothing important has changed which is, of course, both good and bad news for the Jewish state.

Article Link to Commentary:

Trump's Financial Report? That's Rich

By Timothy L. O'Brien
The Bloomberg View
May 20, 2016

Donald Trump has once again made his income and wealth objects of fascination and confusion in the 2016 presidential race -- this time, by filing an updated personal financial disclosure form with the Federal Election Commission.

“I filed my PFD, which I am proud to say is the largest in the history of the FEC,” Trump said on Tuesday. “I have built an incredible company and have accumulated one of the greatest portfolios of real estate assets, many of which are considered to be among the finest and most iconic properties in the world. This is the kind of thinking the country needs.”

While Trump’s iconic (but relatively modest) real estate portfolio hasn’t actually allowed him to claim membership in the top tier of major New York real estate developers for decades now -- based on the square footage or value of the properties he’s owned and brought to market -- the new personal finance disclosure did give him the opportunity to put more public clothing on his finances.

What were the “incredible” numbers the presumptive Republican presidential nominee disclosed in the new filing? More than $557 million in “income,” up from $362 million he disclosed in an FEC document filed last July. Hold on, though.

In a press release, the Trump team also described that $557 million as “revenue.” To be clear, “income” is meant to be the amount of money Trump puts in his own pocket each year and “revenue" is the amount of money his businesses pull in (before expenses and other goodies that reside above the bottom line). As he did in his July release, Trump appears to be conflating income and revenue in his public disclosures.

These figures also look a little odd when paired with reporting from Crain’s Aaron Elstein, which showed that Trump received a New York State tax break reserved for households with annual incomes of $500,000 or less. Trump received the breaks automatically because he was on a list of eligible recipients. “Could a reason be that his income in certain years was actually under the $500,000 threshold?” Elstein asked. “No one who knows will say.” (Trump’s representatives and state officials agree that taking the break was a mistake.)

Trump also noted in the press release this week that his net worth had recently ballooned to an unspecified figure “in excess of $10 billion.” That’s soared handsomely from the $8.7 billion he said he was worth when he announced his presidential run last June, and the $10 billion he said he was worth only a month after that. It’s also far more than the $2.9 billion figure that my Bloomberg News colleague Caleb Melby arrived at after reviewing Trump’s holdings in July.

Trump, who flirted with personal bankruptcy in the early ’90s, has never publicly offered an independently vetted assessment of all his debts. Indeed, much of the financial information he discloses is self-reported. Until that changes, there’s a good chance that a strong dose of grade inflation runs through all of the net worth figures cited above.

There’s a method to all of this for Trump. Despite a long history of major business failures, he has used claims of outsized wealth as proof that he’s a business titan and savvy deal-maker -- skills he claims will accompany him to the White House. Trump has also gotten decades of traction with the media by offering wildly differing statements about how much money he has, coaxing flocks of newspapers, magazines, TV shows and Web sites into ping-pong matches in which interviewers guess at what he’s worth just as he sends another magical number back over the net. (Disclosure: I wrote a Trump biography, “TrumpNation,” for which he sued me in 2006 because, among other things, it questioned the size of his fortune. The suit was later dismissed.)

Trump has courted inclusion in the Forbes 400 list of the wealthiest Americans ever since the tally was first launched in 1982. He made the cut that year, when the magazine gave him props for an unspecified share of a family fortune estimated to be $200 million. Casino regulators, on the other hand, combed through his books as part of a licensing process at the time and they calculated that Trump had just $6,000 in savings, received a $100,000 salary from his wealthy father, and had snared a $1 million commission for completing a New York hotel deal -- all balanced against a $35 million credit line from a bank. In short, he appeared to be light on savings and potentially swamped in debt, which isn’t typically a recipe for robust personal wealth.

Trump climbed the Forbes list in subsequent years, earning his place in 1989 based on the notion that he had $1.7 billion. Then he disappeared entirely in 1990, not to return until 1996. Forbes speculated that Trump’s wealth in 1990 may have dropped to zero, when, in fact, his personal loan guarantees of $900 million at the time put him well below even that. He appeared on the Forbes 400 again in 1996 and has been a mainstay ever since.

In 2004, while I was trying to assess Trump’s wealth, he told me that he was worth $4 billion to $5 billion before lowering the figure later that day to $1.7 billion. My sources -- individuals who worked with Trump and had a good sense of his finances -- thought he was worth $150 million to $250 million. Trump sued me for publishing that figure as part of a range of assessments of his wealth, saying it had damaged his reputation and business. Among the documents discussed during the litigation was a Deutsche Bank assessment from 2005 that put Trump’s net worth at about $788 million; at the time, Forbes had pegged Trump at $2.7 billion, he was telling bankers and regulators that he was worth $3.6 billion, and he was telling me he was worth $5 billion to $6 billion (a billion or two more than what he had told me the year before).

By any measure, Trump is a really rich dude. But his fixation on ceaselessly tossing out sky-high figures displays a routine neediness that’s cause for concern in a candidate for the presidency. It also is something you don't see in a long line of wealthy businesspeople stretching from Rockefeller and Buffett through Gates and Zuckerberg -- all of whom chose to do other things than brag about their riches.

“A fellow asked me that once and I said, ‘I don’t know,” Nelson Bunker Hunt once told a congressional panel grilling him about his net worth. “But I do know people who know how much they are worth generally aren’t worth much.”

Article Link to The Bloomberg View:

Inside The Clinton Paid Speech Machine

What, exactly, do you get when you pay a Clinton $285,000 for an intimate, closed-to-the-press speech?

By Annie Karni
May 20, 2016 

Hillary and Bill Clinton’s highly paid speeches — whose transcripts they steadfastly refuse to release despite pressure on the campaign trail — are cloaked in secrecy.

Bernie Sanders and Donald Trump have both seized on the issue, raising red flags about what the Clintons say behind closed doors to Wall Street firms and other groups that they don’t say in public. By digging in their heels, the Clintons have only drawn more attention to the question: What, exactly, do you get when you pay a Clinton hundreds of thousands of dollars for an intimate, closed-to-the-press speech?

In Bill Clinton’s case, it turns out, you get a dose of the full, unplugged Bubba.

A transcript of a private $285,000 paid speech Bill Clinton delivered last year at the “China-U.S. Private Investment Summit” in Austin, Texas, obtained by POLITICO, offers a glimpse behind the curtain of the Clintons' controversial paid speaking gigs — and some insight into how the former president holds court out of sight of the press.

“Once I got a cartoon in the mail when I was fighting out that Whitewater business,” he reminisced in front of about 60 Chinese investors and 150 American businesspeople gathered to discuss bilateral investment opportunities in late March 2015 — two weeks before Hillary Clinton officially declared her candidacy. “And Jiang Zemin and I are sitting together at a state dinner, and in the first frame, I say to President Jiang, I said, ‘You know, you're doing great economically, but our country has more human rights.’ And he looked at me and he said, ‘Yes, and if you were the leader of China, Ken Starr would be in prison making running shoes.’”

A self-deprecating Clinton admitted of those scandal-tarred days of his presidency: “I saved that cartoon for a long time. I must say there were days when I wondered who had the better model.”

Bill Clinton has raked in close to $3 million in paid speeches since his wife launched her second bid for the White House last April, according to Hillary Clinton's most recent financial disclosure. The enormous fee for the Texas speech — which took place when Hillary Clinton was already scouting campaign office space but had yet to officially announced her bid — signals just how much well-heeled clients are willing to pay to hear from a former, and potentially future, occupant of the White House.

Waxing philosophical at one point, the former president mused: “I learned that the weight, combined weight, of all the ants on Earth is greater than the combined weight of all the people on Earth. That’s sobering,” Clinton said, quoting a fact from microbiologist E.O. Wilson’s book “The Social Conquest of Earth, which he called “the most important political book I have read in the last five years.”

His long digression on insect life was to furnish a broader point about cooperation between nations. At one point, discussing world leaders he has respected, he said emotionally: “I never loved another man more than I loved Yitzhak Rabin. I can't even describe how I felt about him.”

Clinton’s expansive, discursive speaking style is sometimes on display on the campaign trail, where it is criticized as a distraction from his goal of touting his wife’s accomplishments. But the transcript of a private speech shows off a freer, looser Clinton than the one who has been trying to sell a candidate who is seen as the definition of status quo as "the best change maker I've ever known."

The Austin speech last March also suggests that Bill Clinton's talents might best be used in a diplomatic capacity, rather than in a role designed to oversee economic domestic policy as the Democratic frontrunner recently suggested — which sparked criticism for leaning too much on her husband.

In the private speech in front of the conservative-leaning business group, Bill Clinton assumed a diplomatic tone discussing China, displaying a softer edge than his wife shows on the campaign trail where she typically highlights security issues.

He touted the importance of investment opportunities in China, noting “we all know what the problems are, but I want to talk to you about the opportunities and why I think it’s so important that you’re here.” Extending an open hand, he added: “It doesn’t bother me that we have differences of opinion. And we should not seek to abolish them or sweep them under the rug. We should instead become comfortable talking about them.”

The former president did, however, acknowledge the detention of five women last year who tried to start a campaign against sexual harassment -- which Hillary Clinton denounced on Twitter as an "inexcusable" act that "must end." But he did so in less severe terms.

“I do think that it's too bad these women have been arrested in the run up to the 20th anniversary of the Beijing Conference,” he said. “I think that there's a way to be a strong country and tolerate dissent.”

Hillary Clinton has a hawkish reputation when it comes to China — as secretary of state, she railed against Beijing’s “deplorable” human rights record and even questioned the future of the Chinese regime. But her campaign aides have also suggested China needs to be a partner to the United States in creating stability in Afghanistan. In his speech, Bill Clinton stuck to an upbeat pitch to investors as well as hope for a prosperous future between the superpowers.

“There may come a time when the U.S. and China will become involved in some irreconcilable conflict, as many pessimists believe, but it doesn't have to happen if we work for the best and both plan for our security,” he said. “I think you can make a lot of money if you're Chinese investing in America and I think you can make a lot of money if you're American investing in China...I think the Chinese president is doing things that make sense. It's a good time to invest there.”

He emphasized that both sides need each other: “It is very, very important to do what you are here to do. We need more Chinese investment in America, just like we need more American investment in China....Nobody is right all the time. Differences of opinion are healthy and debate is important, but it is really important to find a way for what we have in common to trump our interesting differences.”

Still, hiring Bill Clinton as a keynote speaker doesn't mean he will limit himself to the specific topic of the conference.

In a Q&A following the speech, Clinton discussed at length the influence his great uncle had on him growing up, calling him “the smartest person that I ever met in my own family. I believe his IQ was 180 or more. He had only six years of schooling, but he was breathtakingly brilliant. And in his old, old age he could remember the names of dogs he had owned 60 years earlier and things like that.”

The former president said he credits his great uncle for teaching him his good people skills. “I listened and I learned that every person has a story and that every person can be inherently interesting if they're not too shy, or too scared, or too scripted, too controlled to block their own story,” he said.

Clinton also seemed to forecast the divisive election cycle to come, where a brash and bullying candidate has managed to become one of the presumptive nominees.

“In our family when you were a child you could not tell a story until you proved you could listen to one,” Bill Clinton said. “And my aunt, my uncle, my grandparents, they would look at me and say, Bill, did you hear that? And I'd say, yes, I did. Did you understand it? I think so. What did you hear? And you would have to stand up and say what you heard. And I don't think so much of that happens anymore.”

Of those listening skills, he said: "I think that’s why I got elected president."

Article Link to Politico:

Inside The Clinton Paid Speech Machine

Democrats Expect Warren To Play Peacemaker Once Primary Ends

By Alexander Bolton
The Hill
May 20, 2016

Democratic senators expect Sen. Elizabeth Warren (D-Mass.) will soon make moves to mollify restive liberals and unify the Democratic Party behind Hillary Clinton.

Several Democratic senators say they have approached Warren about the role she can play, insisting she is best positioned to mend the schism between the Clinton and Bernie Sanders wings of the party.

Warren has a loyal following among the more liberal Democrats who favor Sanders. She has told colleagues she will play the role of peacemaker, but not until after the last major round of primaries on June 7.

“I think Elizabeth can and will be very helpful,” said Sen. Jeanne Shaheen (D-N.H.), a Clinton backer who spoke to Warren on Wednesday.

“She is very interested, at least in my conversations with her, in doing everything she can to help get the party to unite for November,” she added.

Warren and her office declined requests to comment.

Shaheen expressed hope that Warren would attend and act as a unifying figure at the New Hampshire Democratic convention that is scheduled for June 18.

Democrats fear Sanders supporters might provoke more disruptions, such as occurred last weekend at the Nevada Democratic convention, which devolved into shouting matches and chaos.

Another Democratic senator who has spoken to Warren and requested anonymity to discuss their interaction said, “We’ve got to land this plane and I want her in the control tower.”

“She’s trying. I think she’s an honest broker,” the lawmaker added.

But there’s some doubt about whether Clinton’s inner circle will welcome Warren, who was once seen as a rival for the nomination, into the role of party unifier.

“The question is whether the interior of the Clinton campaign is willing to trust her,” the Democratic senator said.

Other Senate Democrats, however, note that Warren signed a letter in early 2013 urging Clinton to run for president, and see that as evidence that she will get behind Clinton in the next several weeks.

“I feel fairly confident that she will endorse Hillary in her own time, that will help,” said Sen. Tim Kaine (D-Va.), another pro-Clinton Democrat who is believed to be on her short list for vice president.

“Her validation of Hillary at the right time will help bring everybody together,” he added of Warren.

Democrats decided at a meeting Tuesday to let Senate Democratic Leader Harry Reid (Nev.) take the lead in handling Sanders after the blow-up in Nevada, but that effort has yielded little so far.

Lawmakers had hoped Reid, who according to senior Democratic aides has a close personal relationship with Sanders, would persuade him to soften his tactics.

The leader spoke to Sanders for 10 minutes on Tuesday and urged him to rein in his supporters as reports emerged of Nevada Democratic Party Chairwoman Roberta receiving death threats.

But the result fell short of expectations. Soon after their talk, the Sanders campaign issued a statement that criticizing the party for allegedly unfair treatment, and addressing the turmoil in Nevada only in passing.

Reid himself said he was “surprised” by the defiant response.

Sanders doubled down later Tuesday during a speech in Southern California where he challenged the party leadership to “open the doors, let the people in!”

His senior campaign advisers now say they will make an all-out push in the final weeks to challenge Clinton and defeat her in California’s June 7 primary, in which 546 delegates are at stake.

Democratic senators on Thursday recoiled at a New York Times report that Sanders plans to open an intense two-month phase of the campaign intended to inflict “a heavy blow on Clinton.”

“That’s a mistake for him to be more aggressive and more divisive. I think having the Democratic candidates in an important primary attacking each other instead of debating each other’s policies just simply puts at risks our prospects in the fall election,” said Sen. Chris Coons (D-Del.), who supports Clinton.

The Senate’s Democratic women, who make up Clinton’s most loyal supporters in Congress, have for months been pressing to back Clinton.

But the effort picked up urgency in the last several days as the animosity between Clinton and Sanders supporters intensified.

Lawmakers fear that liberals in the “Bernie or Bust” movement could spin off into an extreme faction within the party such as they believe now exists within the GOP.

“I’m worried about what’s turning out to be the creation of a Tea Party-like element in the Democratic Party,” said Rep. Emanuel Cleaver (D-Mo.).

Just as Republican establishment figures such as Senate Majority Leader Mitch McConnell (R-Ky.) and former Speaker John Boehner (Ohio) have had trouble controlling the Tea Party, Democrats fear their leaders may have limited influence over the newly emboldened liberal faction.

They see Warren, however, as someone who can win disaffected liberals over to Clinton, even if Sanders withholds his enthusiastic endorsement.

“I told her she’s in a unique position to fix this,” said one Democratic senator who spoke recently with Warren.

Senate Democratic leaders tapped Warren as their liaison to liberal groups after their disastrous showing in the 2014 midterm elections, creating a new position in the leadership for her.

She noted in an interview with the Boston Globe at the time that the new role gave her “a seat at the table” and an “opportunity to talk, to persuade and sometimes to lead.”

Her Democratic colleagues say now’s the time for her to step up.

Article Link to The Hill:

Corruption In Iraq: Where Did All the Money Go?

Officials have pilfered funds that could have been spent fighting ISIS.

The National Interest
May 20, 2016

Once again, the subject of illicit financial flows from kleptocratic regimes is in the international spotlight, this time in the form of the “Panama Papers.”

What is surprising is the level of shock at something that should have been obvious. For a long time, many financial institutions turned a blind eye to nefarious PEPs (politically exposed persons) and not just in Switzerland, as we see now with big names such as HSBC, once again deflecting allegations.

The industrialized world can’t afford any more surprises like this, otherwise aid and loans will continue to enter weak states, only to be rapidly snuckout.

Encouragingly, there are signs that governments and regulators are being energized by the Panama Papers. The U.S. Treasury will soon announce a requirement that banks disclose the owners of shell companies, and in the UK regulators set a deadline for banks to disclose details of clients’ relations with Mossack Fonseca, the company at the centre of the current storm.

Iraq, with lamentably high corruption, can be a litmus test for revived effort. Iraq also desperately needs to recover stolen assets, because it is running out of money for both fighting ISIS and rebuilding Iraq, in order to prevent ISIS 2.0.

Luckily, the United States is leading the way with the formation of the Kleptocracy Asset Recovery Initiative (KARI), but far more global coordination is needed. In Iraq, financial assistance should be put into ministries to train people in spotting and preventing corruption.

There are certainly good young people who want change in the Iraqi government, the challenge is creating a culture where they can speak out. That will take a renewed and internationally coordinated capacity building effort. As an example, the Higher Council of Education Development, an Iraqi organization that has sent four thousand students overseas to help ministerial capacity, had a budget of just over $100 million last year. The international community must urgently help Iraq to resource such work, because so far war expenditures dwarf other efforts.

Asset recovery and civil service capacity building are far smarter than traditional forms of aid. The United States has already tried a $60 billion reconstruction effort in Iraq, for everything from schools to prisons. Around $700 billion of Iraqi oil revenue has not achieved much more, all because of corruption and mismanagement.

Alas, this is a familiar story for Iraqis, who live in a country ranked 171 in the Corruption Perception Index. Corruption in Iraq is tied to chronically weak accounting and murky governance. Estimates of how much goes missing vary from $100 billion lost since 2003 to $20 billion in 2013 alone. One Iraqi government official put total money lost to corruption as high as $300 billion. This is fifteen times the amount Iraq now seeks to borrow.

As Iraq’s currency reserves rapidly drain and state salaries run out, the ultimate effect could be giving the so-called Islamic State vital breathing space, as the Iraqi state loses the means to function.

Meanwhile, corruption has gotten worse. In 2005, Iraq put out warrants for twenty-seven officials at the Ministry of Defense accused of stealing over $1 billion. By 2012, the Commission of Integrity investigated fourteen officials in the Ministry of Defense for taking kickbacks in a $4.2 billion arms deal.

Last year the late Ahmed Chalabi found that nearly thirty companies were making off with almost $4 billion, through forging invoices and taking funds from the Central Bank of Iraq. What could be more lamentable than phantom projects funded by fake invoices made to the central bank? Currency auctions must stop, because they are killing Iraq.

Disturbingly, it has even been reported that not just one but multiple ministries have been involved in carefully organizing “phantom projects” and have turned government purchasing into a racket. Overly generous subsidies in fuel and food, to the tune of at least $20 billion a year, have created vast black-market opportunities. Those in government get the first opportunities to be enriched.

Not that they need to get rich in the first place, because just having the job is enough. Last year, MPs’ salaries were $11,000 per month, twenty times the average Iraqi salary (not counting benefits and allowances of over $15,000 per month). In the United States, the equivalent would be a congressman earning over $1 million a year. This is the culture that Prime Minister Haider al-Abadi is now trying to tackle.

Dangerously, public anger has reached a fever pitch due to a salary crunch hitting Iraq’s bloated public sector. At the start of this year, the Iraqi government was spending over $3 billion on wages, but only around $2.5 billion was coming in oil revenues; for over a year now, workers at ministries have seen salaries delayed, while some plants have been closing down.

The death of industry is inevitable, as ministries are often politicized hiring schemes, giving out jobs for votes in Iraq’s dysfunctional muhasasa or “quota” system.

Now, some Iraqi leaders might finally be starting to wake up. Moqtada al-Sadr, sensing public outrage, has called for mass demonstrations, but tellingly also detained one of his most prominent party members, Bahaa al-Araji. By chance or by design, protestors of the erratic cleric Sadr have now stormed Iraq’s parliament, although at the time of writing most of the demonstrators appear peaceful.

Araji owns a number of large properties in Baghdad, wealth far beyond his salary as an MP. He has tried to explain this as being through “the blessing of God.” His arrest, as well as a few other high-profile cases, shows an attempt to lead by example. But in the past, prosecutors have complained of a culture of intimidation.

This is where initiatives like KARI could be vital. But these efforts need more teeth, both within Iraq and outside. Within Iraq, it is time for far more severe punishment for corruption, and here Baghdad can take a lesson from countries such as South Korea, which now imposes fines on corrupt officials—six times the value of money taken.

Weakened institutions such as the Integrity Commission should be bolstered by an organization outside of Iraq, linked to embassies and in coordination with foreign anticorruption bodies. The role of this Iraqi entity would be to identify corruptly obtained assets, such as large properties that would have been impossible to buy on an Iraqi politician’s salary, and to take tip-offs about secret assets.

Sharing information with organizations such as the World Bank’s Stolen Asset Recovery Initiative, Iraqi officials can then start to develop a broader picture of where assets are hidden.

As a member of the United Nations Convention Against Corruption, Iraq can then insist on mutual legal assistance requests. The process is long, and to date there has been difficulty in recovering significant stolen assets, even from notorious kleptocrats such as Tunisia’s Zine el-Abidine Ben Ali (only $29 million has been recovered of an estimated $3 billion.)

But the Philippines shows that it can be done, having recovered around 25 percent of the funds plundered by the Marcos regime. A similar success rate for Iraq would represent a phenomenal amount of money, perhaps through pursuing assets through “in rem” legal means. Iraq has successfully used this principle in the courts (holding a court case against an asset, rather than a person) in the case of stopping a shipment of Kurdish oil.

In the case of stolen assets, the aim of a similar effort would be to create a chilling effect on the culture of corruption, where no corrupt official (or their proxy network) is free from public shame. To reiterate, Iraq cannot do this alone. In the wake of the Panama Papers, White House press secretary Josh Earnest was asked about the documents and noted that “the United States continues to be a leading advocate for increased transparency in the international financial system.”

Now, more than ever, is the time to support those words with tougher action. For the country on the front line against the so-called Islamic State, it could be the best kind of support.

Article Link to the National Interest:

Who Are the Real Deniers Of Science?

When denying science is a progressive moral imperative.

By Jonah Goldberg 
The National Review
May 20, 2016

Why do liberals hate science?

The Left has long claimed that it has something of a monopoly on scientific expertise. For instance, long before Al Gore started making millions by claiming that anyone who disagreed with his apocalyptic prophecies was “anti-science,” there were the “scientific socialists.” “Social engineer” is now rightly seen as a term of scorn and derision, but it was once a label that progressive eggheads eagerly accepted.

Masking opinions in a white smock is a brilliant, albeit infuriating and shabby, rhetorical tactic. As the late Daniel Patrick Moynihan famously said, “Everyone is entitled to his own opinion, but not his own facts.” Science is the language of facts, and when people pretend to be speaking it, they’re not only claiming that their preferences are more than mere opinions, they’re also insinuating that anyone who disagrees is a fool or a zealot for objecting to “settled science.”

Put aside the fact that there is no such thing as settled science. Scientists are constantly questioning their understanding of things; that is what science does. All the great scientists of history are justly famous for overturning the assumptions of their fields. The real problem is that in politics, invocations of science are very often marketing techniques masquerading as appeals to irrefutable authority. In an increasingly secular society, having science on your side is better than having God on your side – at least in an argument.

I’m not saying that you can’t have science in your corner, or that lawmakers shouldn’t look to science when making policy. (Legislation that rejects the existence of gravity makes for very silly laws indeed.) But the real intent behind so many claims to “settled science” is to avoid having to make your case. It’s an undemocratic technique for delegitimizing opposing views and saying “shut up” to dissenters.

For example, even if the existence of global warming is “settled,” the policies for how to best respond to it are not. But in the political debates about climate change, activists say that their climatological claims are irrefutable and so are their preferred remedies.

If climate change is the threat they claim, I’d rather spend billions on geoengineering to fix it than trillions on impoverishing economic policies that at best slightly delay it. It doesn’t matter; I’m the Luddite buffoon for thinking ethanol subsidies and windmills are boondoggles.

Even more outrageous: If you dispute, say, the necessity of spending billions on windmills or on killing the coal industry, you are not merely wrong on climate change, you are “anti-science.”

Intellectually, this is a monument of asininity so wide and tall, even the mind’s eye cannot glimpse its horizon or peak.

For starters, why are liberalism’s pet issues the lodestars of what constitutes scientific fact? Medical science informs us fetuses are human beings. The liberal response? “Who cares?” Genetically modified foods are safe, sayeth the scientists. “Shut up,” reply the liberal activists. IQ is partly heritable, the neuroscientists tell us. “Shut up, bigot,” the liberals shriek.

Which brings me to the raging hysteria over the plight of transgendered people who need to use the bathroom.

The New York Times recently reported about A. J. Jackson’s travails in a Vermont high school. “There were practical issues,” Anemona Hartocollis writes. “When he had his period, he wondered if he should revert to the girls’ bathroom, because there was no place to throw away his used tampons.”

Now, one can have sympathy for the transgendered – I certainly do – while simultaneously holding to the scientific fact that boys do not menstruate. This is a fact far more settled than the very best climate science. Perhaps it’s rude to say so, but facts do not cease to be facts simply because they offend.

In New York City, Mayor Bill de Blasio is pushing to fine businesses that do not address customers by their “preferred name, pronoun and title (e.g., Ms./Mrs.) regardless of the individual’s sex assigned at birth, anatomy, gender, medical history, appearance, or the sex indicated on the individual’s identification.” The NYC Commission on Human Rights can penalize offenders up to $250,000.

Many liberals believe that “denying” climate science should be a criminal offense while also believing that denying biological science is a moral obligation.

In the law, truth is a defense against the charge of slander, but for liberals, inconvenient truth is no defense against the charge of bigotry.

Article Link to the National Review:

Elizabeth Warren’s Next Crusade

Can liberals fix the safety net for 21st-century workers?

By David Dayen
The New Republic
May 19, 2016

Senator Elizabeth Warren has a knack for recognizing the challenges facing ordinary Americans years before the rest of the political world gets there. The Consumer Financial Protection Bureau was an idea she generated as a Harvard law professor in mid-2007, when the housing market was just beginning to melt down. She was well out in front on the need to reinstitute the firewall between commercial and investment banking, a cause taken up in the presidential primaries by Bernie Sanders.

So when Warren turned her attention on Thursday to the atomized American workplace and what I have called the 1099 economy, it was a huge moment. It signaled that the question of how to rebuild the safety net for a twenty-first-century work environment is now poised to be the dominant topic for American liberalism in the next decade.

At the New America Foundation’s annual conference in Washington, Warren gave a speech called “Strengthening the Basic Bargain for Workers in the Modern Economy.” American workers, she pointed out, have already fought for and won the ability to work a 40-hour week at a living wage in a safe workplace—with compensation if you get hurt, unemployment insurance if you get fired, Social Security when you retire, and a union to help with your grievances. These innovations “helped make sure that part of the increased wealth generated by innovation would be used to build a strong middle class,” Warren noted.

We shouldn’t have to wage those battles again. But we do: The classifying of employees as temps or freelancers, “permalancers” or independent contractors or gig workers, necessitates it. The structure of employment law that served the nation over the past eight decades is fraying, shot through with loopholes that employers use to their advantage to shortchange workers. For example, President Obama’s new overtime rule will help millions of salaried workers who currently don’t receive extra pay when they work more than 40 hours a week. But it does nothing for freelancers.

Progressive and New Deal-era employment law arose from the Gilded Age’s exploitation of workers powering the Industrial Revolution. There’s nothing new about modifying the rules to accommodate new technologies, so workers can share in the wealth produced by them. There’s also nothing new about a “gig economy” service like Uber: Long before anybody knew what an app was, employers were moving to classifying their workers as independent contractors to shirk their responsibilities.

We have to redesign how we deliver a safety net to every worker in the economy, regardless of what their employer decides to call them.

On-demand work prospered after the recession because workers needed to fund their own safety nets or find stopgap work in a tough job market. “For many,” Warren said, “the gig economy is simply the next step in a losing effort to build some economic security in a world where all the benefits are floating to the top 10 percent.”

Warren doesn’t think we should fear the technology that has driven some of this change; this was not a speech about hating Uber or Lyft. But the technology demands a redesign of how we deliver a safety net to every worker in the economy, regardless of what their employer decides to call them.

So how can we re-introduce stability and security into the workplace for everybody who contributes to the economy? In figuring that out, Warren arrives at the same place I did when considering the 1099 economy: We need to make benefits currently tied to the workplace universal and portable.

Warren puts the steps necessary to do that into a few compartments. First, she wants to universalize workers’ compensation and paid time off (vacation, personal, and sick days, along with paid family and medical leave). She also wants to require Social Security payroll deductions. Right now, 1099 workers don’t have payroll taxes automatically deducted, and depending on how they structure their taxes, they may pay in at much lower rates than their earnings would dictate, leading eventually to lower retirement benefits. Warren proposes to automatically deduct those payroll taxes from freelance and gig workers’ paychecks (with employers picking up their share), as well as deducting small amounts for disability or workers’ compensation insurance. This would use efficiencies created by technology to benefit workers, rather than to push them out of a job.

Second, Warren endorses the idea of making benefits portable—an idea endorsed by Nick Hanauer and David Rolf on the left and Ian Adams of the R Street Institute on the right. The Affordable Care Act does some of this work already; a freelancer can take that individual insurance coverage with them regardless of their job. Warren called on Thursday for “enhancing portability” in the ACA, a nudge toward putting employer-sponsored health care on the exchanges. But she really focused on pension benefits for 1099 workers and independent contractors, run by workers for the benefit of workers. “It’s time for all workers to have access to the same low-cost, well-protected retirement products that some employers and unions provide today,” Warren said.

The final compartment: Warren wants to streamline worker classification, narrowing the multiple legal definitions of an employee so companies cannot use legal loopholes to get out of their responsibility to provide benefits. And she wants to give contract workers the right to organize, to “bargain as a group with whoever controls the terms of their work”—though it’s not clear how to make that a reality.

Warren stresses the benefits of a universal, portable benefits system not just for workers, but for employers. They would no longer have to become health-insurance and wealth-management companies on the side in order to deliver benefits. They could outsource that responsibility to portable-benefit managers and focus on their core business. Employers should be obligated to contribute to these plans, rather than leaving it entirely to workers to finance. (Warren is a bit fuzzy on that point, but it wasn’t the purpose of Thursday’s speech.) But getting this right would mean unshackling companies from reinventing the wheel on delivering health insurance and benefit packages to their employees. It would ultimately help, not hurt, their bottom lines.

Portable benefit packages are the next frontier of liberal policymaking. It’s a recognition that at least some of Americans’ economic anxiety derives from the fact that workers have all become free agents, hustling from gig to gig without the security of a lifetime career and the foreknowledge of a dignified retirement. The gap between worker productivity and worker compensation has been a direct result of the atomized workplace, of the great risk shift from employer to employee.

When Warren attaches her name and stature to a subject, it usually becomes part of the liberal policy framework. She brought the Democratic Party along on increasing Social Security. She opposed Michael Froman’s nomination as U.S. Trade Representative long before anyone ever heard of the TPP. She has some power to set the agenda for the Democratic caucus. And now she’s pinpointing this major gap in how we treat workers, and how employers have been allowed to leave them stranded without a safety net.

If Hillary Clinton becomes president and Democrats win the Senate, Warren will be able to start on this workplace agenda from the majority as a lead policymaker on the center-left. The rest of the party should come along with her.

Article Link to the New Republic:

A Tale Of Two Plane Disasters

By Noah Rothman
May 20, 2016

The EgyptAir flight that fell off the radar and disappeared over the Mediterranean on Thursday while on route from Paris to Cairo took 66 souls with it. Soon after the plane disappeared and was presumed to have crashed, the Egyptian Civil Aviation Ministry revealed that the possibility that terrorism caused this aircraft to fail is “higher than that of a technical error.” If this incident is proven to be an act of terror, it is a disturbing one – but, even more disturbingly, perhaps not unique.

When Flight MS804 disappeared, the plane’s pilots had not sent out a distress signal. The aircraft vanished from radar 174 miles off the Egyptian coast, far beyond the range of shoulder-fired missile from local terrorist groups. NBC News revealed that an intelligence source within the U.S. government disclosed that, while the cause is still unknown, their information indicated that an onboard explosion caused the aircraft to descend suddenly and disappear. If this is demonstrated to be an act of terrorism, it’s extremely troubling.

This isn’t the first Egypt-linked airliner to have fallen out of the sky following an onboard explosion within the last year. In October of 2015, the Russian Metrojet Flight 9268 crashed into the Sinai desert shortly after liftoff from an Egyptian airport, resulting in the death of its 224 passengers. Shortly after that incident, investigators began to suspect that the plane was brought down by an act of terrorism, one that has become almost unheard of in the post-9/11 world: an onboard bombing.

“[I]t looks increasingly likely” that a “terrorist bomb” took down the aircraft, said Egyptian President Abdul Fattah al-Sisi. President Barack Obama confirmed that U.S. intelligence was looking into that prospect. “There’s a possibility that there was a bomb on board,” the president confirmed.

Western airlines suspended air traffic over the Sinai desert, but there was no indication that a ground-based missile was responsible for the disaster. According to Egyptian officials, local authorities believed that an explosive device had somehow been smuggled onboard the airplane through airport security. An Islamic State affiliate took credit for the attack in the terror group’s magazine Dabiq. ISIS also published passport photographs belonging to the alleged terrorists who supposedly executed the attack and an image of the type of soda can that served as the housing for the improvised explosive device they used. The operation was reportedly retaliation for Russia’s decision to intervene in the Syrian Civil War just a few weeks earlier on behalf of the Assad government.

Despite the American media’s fascination with both terrorism and airplanes falling out of the sky, this incident prompted a conspicuous lack of coverage in the Western press. Perhaps the non-Western identities of the victims onboard this plane contributed to media’s ennui? Maybe the confusion over the type of attack or the panic that it could have sparked given its revolutionary nature imposed some caution on American programmers. Whatever the reason, this incident was woefully under-covered.

In January, an EgyptAir mechanic whose cousin had joined ISIS was arrested for his alleged role in planting the bomb on Metrojet Flight 9268. An unnamed source told Reuters that more arrests were forthcoming. “Two policemen are suspected of playing a role by turning a blind eye to the operation at a security checkpoint,” the source said. “But there is a possibility that they were just not doing their jobs properly.” If any further arrests were made in relation to this incident, they were not widely reported.

Though it is far too early to speculate about the nature of the latest event to strike an EgyptAir-linked flight, it is clear that the incident that resulted in the destruction of Metrojet Flight 9268 deserved greater scrutiny in the Western press. If the event that took down EgyptAir Flight MS804 turns out to also be an act of terrorism, the effect it could have on the international aviation industry will be far-reaching.

Article Link to Commentary:

Russia's Hybrid-Warfare Victory In Syria

Moscow improved its image without real change on the battlefield.

By Ari Heistein and Vera Michlin-Shapir
The National Interest
May 19, 2016

Dennis Ross rightly notes that Vladimir Putin now has the ears of Middle Eastern leaders despite the fact that Russia’s forces in the region are dwarfed in number by their U.S. counterparts. This is in large part because the Russians promoted the now prevailing perception that Moscow is willing to become involved in regional conflicts while America is pulling back. Most recently, Russia celebrated the retaking of the ancient city of Palmyra from Islamic State/ISIS. Despite revelations that cast doubt on Russia’s military achievements in Palmyra, negative reports were overshadowed by Moscow’s resourceful use of public relations.

Although the future of the war in Syria is uncertain, what remains clear is that Russia is fighting a hybrid war, combining its military, diplomatic and media capabilities to achieve its goals using limited armed engagement.

It is true that Russia has experienced some successes on the Syrian battlefield, but these victories are far from establishing Moscow as the new power broker in the region. Russia’s achievement on the ground hinged mainly on the morale boost its backing gave the Syrian Arab Army. This allowed pro-regime forces to perform better in combat, while simultaneously weakening the resolve of rebel forces determined to depose the regime. By launching thousands of airstrikes, Russia has also effectively managed to stabilize a regime that was losing territory in the summer of 2015, and helped the Syrian regime push towards Aleppo and its surrounding towns by the end of the year.

However, when comparing maps of the current situation in Syria to the situation in Syria prior to Russian intervention, Assad’s territorial gains with Moscow’s backing appear negligible. Also, the intervention has yet to put an end to the regime’s setbacks; in just the first week of May 2016, regime forces lost the Shaer gas field to ISIS and the strategic town of Khan Touman to the Al Qaeda affiliate Jabhat al-Nusra. The week prior witnessed the disastrous Russian airstrike on a hospital in Aleppo that killed over fifty innocents. Furthermore, thousands of Russian sorties over the course of eight months have yet to bring about the realization of Assad’s major strategic objective: taking Aleppo.

On the diplomatic front, Russia was seen as a promoter of a political negotiations between the regime and the rebel coalition, and as a backer of a truce between the sides. Yet these efforts did not yield a viable peace process and produced an unstable truce.

Palmyra is a prime example of Moscow’s modus operandi in Syria, in which successes on the battlefield, no matter how marginal or questionable, serve as grounds to promote Russia’s image of success. Damascus and Moscow highlighted the Russian role in the campaign: President Bashar al-Assad said that the Russian air support was “essential,” and the Kremlin’s spokesman said that “regaining Palmyra would have been impossible without Russia’s support.” This achievement received particular celebration due to the city’s historical significance and the devastation that ISIS unleashed on its antiquities.

However, recent revelations from Sky News indicate that Assad’s conquest of Palmyra may have been more an act of collusion than conquest. ISIS defectors claim that “Palmyra was handed back to government forces by Islamic State as part of a series of cooperation agreements.” While not authenticated, this claim is believable, considering the Syrian regime’s long history of partnering with jihadists when convenient: serving as a conduit for jihadists fighting the U.S. occupation of Iraq, the release of Muslim extremists from Sednaya prison in 2011, and an oil trade between ISIS and the regime valued at up to $40 million per month. Such a claim should be devastating for Russia, as one of the major achievements in its campaign against rebel groups has now been called into question. Beyond that, claims that the Syrian regime is coordinating with ISIS should embarrass the Kremlin, which legitimized its military intervention as a campaign to fight Islamic extremism.

Yet this report has not affected the general perception of the battle of Palmyra. Russia’s technique of narrative construction and control through its international media outlets (Sputnik and RT) allowed it to exclude these accusations from its triumphalist narrative. This was fairly easy, since the reports could not be corroborated. Instead, Russia celebrated its victory with a performance of the Mariinsky Orchestra at Palmyra’s Roman theater. The concert was full of symbolism—conducted by the renowned Russian conductor Valery Gergiev; featuring Putin’s close friend, cellist Sergei Roldugin; and dedicated to the archeologist Khalid al-Asaad, who was murdered for refusing to lead ISIS fighters to the city’s hidden antiquities. Putin appeared on a video link to address the audience, which included Russian and Syrian military men, some Syrian civilians, and Western reporters. The message was clear: Russian bravery and resolve place it on the right side of history in protecting Western civilization, embodied by a World Heritage Site, from the barbaric caliphate.

The ability to successfully wage a hybrid war is partly due to Russia’s decision to operate in areas of relative advantage, like Syria. This arena, which the U.S. president has regarded as an unwinnable theater, allowed for marginal successes to garner much admiration. Coupled with a well-coordinated media campaign, Russia was able to keep deployment and engagement limited and remain evasive about even the most basic understandings of this intervention. Its approach allowed the Kremlin much flexibility with the narrative it promoted through its well-organized international media machines.

This hybrid offensive has undoubtedly been effective thus far, as the Western and Middle Eastern media continue to admire Moscow’s entrance into the region.

Article Link to the National Interest:

How America Can Dominate Global Nuclear Energy

Time to rebuild the declining U.S. nuclear industry.

The National Interest
May 19, 2016

Today, the U.S. nuclear export industry is in decline. While the international nuclear export industry has grown over the past few years, U.S. exports have remained markedly flat. Declining competitiveness as other exporters master nuclear-power technology is a key component of the emerging market shift, but a lack of government support for the U.S. nuclear industry compared to the other exporting nations (Russia, China, South Korea, Japan, France and Canada) constitutes the central problem. For example, the United States’ high degree of regulation on its nuclear industry, difficulties for the United States in securing adequate cooperation agreements with importing partners, a lack of public funding for nuclear energy projects, waning research and development budgets, and partisan conflicts that have undermined a nuclear waste solution all hinder the U.S. nuclear energy industry—and all could be solved by improved federal policies.

The U.S. government’s heavy regulations and comparative lack of investment in the industry mean that U.S. projects tend to be slow-moving—leading nuclear energy importers to turn to other nuclear technology exporters, like Russia, whose governments have adopted more industry-favorable outlooks than the United States. While the main problem for the U.S. nuclear industry lies with exports, the domestic industry has also declined in recent decades. Even though billions have been put into designing and funding new domestic plants as well as rebooting old ones, no new plants have opened in the United States in the twenty-first century. In total, the United States is currently working on five projects, all of which have seen major delays. The Watts Bar nuclear plant in Tennessee serves as the most cautionary tale—although the plant is now almost complete, a series of government flip-flops on the project has caused construction so far to take a whopping forty-three years. The story serves as a reminder of just what’s wrong with the U.S. industry. It takes not just government approval, but also sustained and robust commitment, to see through such an intensive project as the construction of a nuclear plant.

Despite some worrisome conditions, however, the U.S. nuclear industry does still have its advantages. A long history of experience in the nuclear sector, widely available human and financial capital, proven plant designs, and rebounding public support for nuclear energy all suggest that the industry doesn’t have a fork in it yet—even though some federal officials might appear to prefer it that way.

If the industry can rebound, it will have the opportunity to seize meaningful influence in the nuclear energy exports market, for although it seems to be falling behind now, its competitors face critical obstacles as well. Russia’s industry is massively overstretched, suffers from corruption and has regularly seen the actual cost of its projects far exceed proposed costs; the South Korean nuclear industry is still battling the effects of a recent bout of corruption and many of its designs stem from U.S. companies, making it difficult for the nation to engage in independent exporting projects;China’s industry has been scrutinized for its safety protocols, and it lacks both exporting experience and government interest in expanding nuclear exports; France’s nuclear exporting companies have fallen on hard economic times and have begun scaling down; Japan's industry faces domestic opposition over exports and is still focused on rebuilding after the Fukushima fallout; while the Canadian nuclear export industry remains comparatively small. And that’s all. Without a lot of competitors, and with all of them suffering serious challenges of their own, the United States is facing an opportunity to seize market share before its competitors can rebound from their current problems.

The market for nuclear-energy technology is large, though the available providers are scarce. Today there are 438 operational nuclear reactors and five hundred additional proposed plants across the globe. Nevertheless, current upper-end estimates for global production capacity for whole nuclear reactor units are still low: approximately six to eight units per year, though each plant usually has two or more reactors. Since global demand is notably higher than that capacity, the United States could be the one to step in and offer faster construction times for countries that don’t want to wait for Russia or South Korea to finish dozens of other projects before beginning theirs. This all goes to show that, even if the United States’ competitors are able to resolve their internal problems, there’s still enough unclaimed space in the nuclear-energy market for the United States to expand its current export capacity. (And if other exporters continue to face troubles, the United States could reach even further into the widening global nuclear market.)

Moreover, interest has picked up the most in areas where U.S. alliances remain strong: namely, Asia. The Far East has twenty-nine nuclear power plants currently under construction, more than twice as many as the next closest region, central and eastern Europe, has under construction. The region coming in third, the Middle East and South Asia, also holds significant potential for U.S. export expansion. While the United States’ relationships in the Middle East are rockier than those in South and East Asia, the possibility of strengthened cooperation in the Middle Eastern nuclear realm could be the key to strengthening security and defense partnerships in the region—if the United States can take advantage of burgeoning interest.

Yet the road to become a nuclear exporting powerhouse once again won’t be an easy one—so what’s in it for the United States? To start with, jobs. A rebuilt U.S. nuclear industry would provide jobs for high-skilled labor and be a significant economic investment. Estimates from the U.S. Department of Commerce suggest that the size of the international market for nuclear technology and services lies between $500 and $740 billion over the next decade, with five thousand to ten thousand jobs resulting from every $1 billion in U.S. nuclear exports. While financing for nuclear power plants varies from site to site, the burden is generally on the importer to provide public or find private backing for the plant’s costs. In some cases, the exporter will cover capital costs in exchange for control over the plant, allowing the exporter to recoup its investments after the plant begins generating and selling electricity.

Because capital costs are the most significant chunk of a plant’s financing, the shape of the overall energy market has implications for the economic viability of nuclear power; for example, carbon taxes or carbon emissions trading can incentive investment in nuclear power, while high interest rates hurt the nuclear market. Fortunately, a global pattern of low interest rates and the increasingly possibility of stronger U.S. actions on climate changes might make for a bullish nuclear energy market in the upcoming years, one that the United States could capitalize on if it strengthened its industry.

The benefits of nuclear exporters aren’t just domestic, either. Nuclear power plants’ vast benefits for their host countries—comparatively low environmental impact, economically efficient energy production, suitability for powering desalination plants—make nuclear power a worthy industry for additional attention. Nuclear-power exports would also provide the United States with a leg up when it comes to proliferation concerns. First, U.S. nuclear-energy partners must negotiate 123 agreements, which help monitor nuclear activities and limit countries’ abilities to develop offensive nuclear capabilities. Second, the U.S. nuclear industry has high safety standards all along the nuclear supply chain, standards that other exporters do not necessarily meet. By designing and exporting safer nuclear plants, the United States could reduce the global risk of nuclear accidents. Third, U.S. nuclear exports would allow the United States to utilize scientific diplomacy to build significant and sustainable partnerships throughout the world; these relationships could translate not only to cooperation on additional nonproliferation issues, but on other areas of security and scientific policy as well. These relationships would also be essential for nuclear security, in that the United States could serve a helpful advisory role in importing states’ efforts to build the educational, regulatory and infrastructural institutions needed to sustain a safe nuclear industry. Finally, U.S. exporting capabilities would also provide intimate knowledge of international partners’ nuclear-energy industries, giving the United States a potential guidance role in the case of nuclear accidents as well as intelligence that could be useful for nonproliferation activities.

Given the many benefits of U.S. nuclear exporters, what can the United States do to build up its industry? The greatest challenge to U.S. nuclear energy exports today is the United States itself, but fortunately, smarter government policy could strengthen the U.S. nuclear industry. For example, strengthening the Export-Import Bank could give nuclear energy exporters more access to financing. U.S. nuclear exporters’ competitors have significant financing from their home governments, in some cases because the nuclear industry is public, and in others because of fairly seamless public-private partnerships. This indicates that U.S. backing of its own nuclear export industry will be essential to ensuring competitiveness.

Similarly, the U.S. nuclear industry could be helped by a reversal of the decision by the Overseas Private Investment Corporation, a U.S. government agency, to exclude financing nuclear power under its environmental responsibility rules. In addition, environmentally friendly policies like the aforementioned carbon tax or carbon emissions trading policies would help the nuclear industry overcome financing challenges while helping the United States combat the dangers of climate change and fossil-fuel dependence. Although a comparatively minor factor, ongoing U.S. efforts to increase and stabilize petroleum prices would also assist with enhancing nuclear power’s appeal and therefore incentivizing private financing.

The U.S. nuclear industry will need diplomatic support from its government, as well. Strengthened global nonproliferation advocacy projects to nuclear importers an image of commitment to nuclear security, while more active efforts on behalf of the United States, to settle favorable 123-agreement negotiations with nuclear importers, would help the United States move along in the export process while maintaining the high safety standards that the U.S. industry is known for.

An additional step on the path forward for U.S. nuclear energy exports would be for the United States to enhance its abilities to address problems regarding nuclear waste. U.S. competitors are cutting deals in which they will take care of nuclear waste—this gives them an advantage in the export market, and enhances nuclear security by taking dangerous materials out of the hands of inexperienced states—but the United States is still struggling to find a solution for its nuclear-waste challenge. In addition, in order to strengthen the appeal of its exports, the United States ought to maintain and enhance its edge in nuclear research and commercialization. This effort will require investment in U.S. national laboratories, the private nuclear industry and research universities.

In particular, the United States could capture both a market and a security advantage if it were to continue to invest in reactor designs that are more difficult to use for military purposes. For example, small modular reactors, such as the mPower, NuScale, Westinghouse SMR and Flibe Energy reactors are already in development in the United States (among others). These designs are more resistant to nuclear-weapons proliferation than other power plant designs, since they don’t use weapons-grade fuel, can operate for a long amount of time without refueling, and could be refueled by exporters without the need for domestic fuel supplies and fuel-cycle infrastructure in importing countries. If the United States could capture a larger market share through the use of SMR reactors, that would constitute a significant contribution to global nonproliferation efforts. However, all this will be no easy feat: at the moment, these designs mostly live on paper right now, so it will take both private and public investment to make this strategy viable. Other reactor designs, such as thorium-based reactors, will require even more substantial R&D investments to be cost-effective, but these raise prospects for reducing proliferation risks from nuclear energy even further.

Although there are always challenges with the safe export of nuclear-energy technology, greater U.S. control over the market would be beneficial for nonproliferation. When viewed in conjunction with the domestic economic benefits, it is clear that, although it will not be an easy road, there is a compelling argument in favor of the revitalization of the U.S. nuclear energy industry and its export capabilities.

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